Deck 17: Biases in Managerial Decision Making

Question 1

Focusing only on one possibility and ignoring other possibilities is known as the common knowledge effect.

Answer 1

False

Question 2

The representativeness heuristic influences causal judgments as well as judgments of category membership.

Answer 2

True

Question 3

Managers experience the pseudodiagnosticity effect any time they treat irrelevant information as relevant.

Answer 3

True

Question 4

Due to the assimilation effect, we tend to agree too readily with similar others.

Question 5

Information quality is determined by two factors: reliability and recentcy.

Question 6

When losses loom larger than gains, people have loss aversion.

Question 7

Simplifying strategies are ineffective in reducing the amount of cognitive effort required to reach a judgment.

Question 8

According to the contrast effect, when outcomes are framed in terms of gains, people are risk-averse.

Question 9

When outcomes are framed in terms of losses, people are risk-seeking.

Question 10

After launching several new product failures, Bill believes he is "due" for a success. Bill is experiencing the gambler's fallacy.

Question 11

Group polarization is the opposite of groupthink.

Question 12

Sample size is paid insufficient attention to when people rely heavily on the representativeness heuristic.

Question 13

Concrete information has less impact on our decisions than abstract information.

Question 14

The assimilation effect occurs when very different objects or issues are compared and judgments of the target object is displaced away from the reference point.

Question 15

In the context of a sea of numbers, verbal information will usually get lost because of the salience effect.

Question 16

Intuitive judgments made on the basis of the representativeness heuristic tends to be non-regressive.

Question 17

Information that is emotionally interesting (vs. uninteresting) is more likely to be vivid for the decision maker.

Question 18

If less relevant information is presented in an interesting manner, it tends to have a greater impact on final decisions than if presented in a dry manner.

Question 19

Short-term profits are less vivid and attention-drawing than long-term profits.

Question 20

Diagnosticity depends on the extent to which information implies one hypothesis over another hypothesis.

Question 21

Judgmental accuracy is influenced by the amount of processing effort a decision maker is likely to allocate to a judgment task.

Question 22

In preference reversal, subjects prefer one gamble when they anchor on outcomes and another when they anchor on probabilities.

Question 23

According to your readings, unbiased decision making is impossible when _____ and _____ are biased.

A) perception and attention
B) motivation and learning
C) attention and learning
D) attention and memory
E) memory and motivation

Question 24

Managers usually are able to express their opinions of job-related topics, despite situational pressures.

Question 25

Information that stands out from the background is said to be:

A) concrete
B) salient
C) temporally proximal
D) vivid
E) a positive frame

Question 26

The dilution effect is even more pronounced when subjects expect to justify their predictions to others.

Question 27

Executives are usually not susceptible to judgmental biases.

Question 28

Basing predictions on memory usually leads to very accurate predictions.

Question 29

Decision makers rarely continue to perceive a belief as true when the basis for the belief is disproved.

Question 30

Overcorrection occurs when managers over analyze and over interpret their decision making processes.

Question 31

Anchors rarely influence expert decision makers.

Question 32

Managers tend to focus most on information relevant to a decision, except that which is:

A) interesting
B) complex
C) easy to understand
D) attention drawing
E) well-written

Question 33

The availability heuristic is based on similarity judgments.

Question 34

Irrelevant information is weighted too lightly in judgment when irrelevant information later becomes relevant.

Question 35

When people that we meet remind us of old acquaintances because their mannerisms are similar, we often infer that these two people are likely to possess other similar characteristics.

Question 36

A gamble has two components - an outcome and a probability.

Question 37

Information that doesn't fluctuate is said to be reliable.

Question 38

Job interviews are often influenced by the correspondence bias.

Question 39

Which of the following is not a factor that influences vividness?

A) Context or background
B) The emotional interest of the information
C) How concrete the information is
D) Whether the information is first hand vs. second hand
E) All of the above influence vividness.

Question 40

A _____ is a shift in judgment away from a contextual reference point.

A) assimilation effect
B) framing effect
C) accommodation effect
D) contrast effect
E) availability heuristic

Question 41

Busy decision makers tend to focus on:

A) all the possibilities
B) one interpretation
C) two to three categories
D) no hypotheses
E) only relevant information

Question 42

Which of the following is not a bias based on overprocessing?

A) The dilution effect
B) The perseverance effect
C) The correspondence bias
D) Premature cognitive commitment
E) All of the above are based on overprocessing.

Question 43

Which of the following is not a common group decision making problem?

A) Common knowledge effect
B) Groupthink
C) Group polarization
D) Selective hypothesis testing
E) All of the above are correct.

Question 44

Assuming that someone's action are a reflection of their true personality or disposition, and ignoring the possibility that their behavior could be influenced by the situation is known as:

A) the dilution effect
B) the perseverance effect
C) the correspondence bias
D) premature cognitive commitment
E) anchoring-and-adjustment effect

Question 45

Kelly is interviewing candidates for a job in her department. She meets Bill. Bill mentions that he is from California. The last person Kelly hired from California had to be fired. Kelly infers that Bill probably won't make a good employee. Kelly is falling victim to what effect?

A) A contrast effect
B) The simulation heuristic
C) The correspondence bias
D) An irrelevant analogy
E) Sensitivity to sample size effect

Question 46

A manager who helped develop a new product that looks like it would be successful predicted a 90% chance of success for the new product. However, historical data indicate that of all new products introduced, only about 50% succeed. This suggests that the manager's prediction was guided primarily by the:

A) representativeness heuristic
B) availability heuristic
C) simulation heuristic
D) anchoring-and-adjustment heuristic
E) contrast effect

Question 47

Various television shows about shark attacks makes it easy to imagine that one could be attacked by a shark when visiting the beach. This assumption is based on what effect?

A) Biased assimilation effect
B) The availability heuristic
C) The simulation heuristic
D) The anchoring-and-adjustment heuristic
E) The dilution effect

Question 48

Which of the following heuristics involve judgments based on memory?

A) The representativeness heuristic
B) The availability heuristic
C) The simulation heuristic
D) The anchoring-and-adjustment heuristic
E) The correspondence bias

Question 49

Which bias results from underprocessing?

A) Insensitivity to sample size
B) The perseverance effect
C) The salience effect
D) The vividness effect
E) All of the above result from underprocessing.

Question 50

_____ is the tendency to focus on one possibility at a time and ignore other possibilities.

A) Groupthink
B) Correspondence bias
C) Pseudodiagnosticity effect
D) Assimilation effect
E) Selective hypothesis testing

Question 51

John thinks Mary is a great team member in his department based on a project he worked with her on a few months ago. During a current project, John has received several complaints about Mary from various team members. Despite this, John persists in believing his initial opinion of Mary is correct. This is an example of what effect?

A) Biased assimilation effect
B) Framing effect
C) Correspondence bias effect
D) Pseudodiagnosticity
E) Dilution effect

Question 52

Risky decision making involves making a tradeoff between the desirability and the likelihood of an outcome. However, managers often focus mainly on desirability in some situations, and focus mainly on likelihood in others. This results in inconsistent preferences. Which heuristic is responsible for this bias?

A) The representativeness heuristic
B) The availability heuristic
C) The simulation heuristic
D) The anchoring-and-adjustment heuristic
E) Correspondence bias

Question 53

What is the best way to overcome groupthink?

A) Encourage group polarization
B) Have a strong leader
C) Frequently seek the opinion of impartial consultants
D) Always have an agenda
E) Always recap. what was discussed at the last meeting

Question 54

Which of the following heuristics involve judgment based on imagination?

A) Groupthink
B) The availability heuristic
C) The contrast effect
D) The anchoring-and-adjustment heuristic
E) None of the above is correct.

Question 55

Stores that experience extremely low sales in one sales period will typically perform better in the next sales period due to:

A) regression to the mean
B) expected utility theory
C) contrast effect
D) simulation effect
E) perseverance effect

Question 56

Home appraisals offered by real estate agents are heavily influenced by listing prices, even when more objective and more useful information is available. Which cognitive heuristic is responsible for this bias?

A) Correspondence bias
B) Availability heuristic
C) Simulation heuristic
D) Anchoring-and-adjustment heuristic
E) Premature cognitive commitment effect

Question 57

_____ is a shift toward a contextual reference point.

A) Assimilation effect
B) Dilution effect
C) Correspondence bias effect
D) Contrast effect
E) Simulation heuristic

Question 58

When managers treat irrelevant information as if it were relevant, they exhibit:

A) contrast effect
B) context effect
C) pseudodiagnosticity effect
D) assimilation effect
E) anchoring-and-adjustment effect

Question 59

When two similar objects or issues are compared, and they are judged to be very similar, this is an example of what context effect?

A) Assimilation effect
B) Framing effect
C) Correspondence bias effect
D) Contrast effect
E) Availability heuristic

Question 60

After approving a $100,000 expenditure for a new piece of capital equipment, deciding to spend $10,000 on a print advertisement seems inconsequential. This is an example of what type of effect?

A) Biased assimilation effect
B) Framing effect
C) Correspondence bias effect
D) Contrast effect
E) Availability heuristic

Question 61

Define the availability heuristic.

Question 62

Discuss the conditions that influence whether or not information is "vivid" for a manager engaging in decision making.

Question 63

What are the most common types of context effects?

Question 64

What effect could bright color potentially have on information being presented? Why?

Question 65

What is the difference between the dilution effect and the perseverance effect?

Question 66

When an event is ambiguous, what guides interpretations? What bias can this lead to?

Question 67

What are the biases the result from "overprocessing?"

Question 68

_____ occurs when a decision maker continues to perceive a belief as true even when the basis for the belief is disproved.

A) A contrast effect
B) The simulation heuristic
C) Pseudodiagnosticity
D) The perseverance effect
E) None of the above is correct.

Question 69

Discuss the effects that often influence group decision making.

Question 70

What affect does the "wording" of a problem have on managers' decisions?

Question 71

What does Diagnosticity depend upon?